Small Business Administration Disaster Relief

Unprecedented action from the US Government offers additional lifelines for small businesses across the country

Economic Injury Disaster Loan Program

Small businesses across the country are now eligible to apply for the SBA Disaster Relief Program, specifically the Economic Injury Disaster Loan. Through this program, small business owners can apply for low-interest loans up to $2 million to counter canceled events, reduced hours/closed stores, and sick leave resulting from the COVID-19 public health emergency. The small business financial assistance was part of an $8.3 billion emergency aid package that the Senate recently passed.

These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay. All individuals with an ownership stake greater than 20% will have to fully personally guaranty the loan. Changing ownership prior to application to lower an individual’s ownership to avoid a personal guaranty could jeopardize eligibility.

The SBA is targeting quick turnaround times to ensure companies have access to funds as soon as possible. Application approval is optimistically expected to take less than a week after a business applies directly online. The SBA hopes it will take no more than 30 days to close and provide funds after successful submission.

This morning, the SBA announced it will automatically defer payments on its existing disaster loans through the end of the year. You need not apply for deferment.

Application Details

Online Application: Disaster Loan Assistance

You’ll have to submit the following to successfully apply:

• SBA Loan Application
• Tax Information Authorization for each owner with minimum 20% ownership interest in the business.
• Federal, personal, and business tax returns for the last 3 years, including all schedules (include personal tax returns for each owner with minimum 20% ownership interest in the business).
• Personal Financial Statement for all owners of the business with minimum 20% ownership interest.
• Schedule of Liabilities listing all fixed debts
• A current year-to-date profit and loss statement and balance sheet.
• Monthly sales figures beginning 3 years prior to the disaster and continuing through the most recent month available. Total figures for each year should reconcile to the sales figures on corresponding tax returns.
• Written explanation of the amount you are seeking and how it will be used. Describe the loss.
• If requesting more than $500,000, additional documentation will be required.

“Small businesses play an integral role in our economy and throughout our communities. Our government must continue to be there for them during this difficult and uncertain period, and I urge all impacted businesses to take advantage of this critical assistance” — Congresswoman Grace Meng

The CARES Act

Another program currently working its way through congress could provide a comparable solution for many businesses. On March 22, Senate Republicans released a revised draft of the CARES Act that reflected Democratic input; the Act is now a $2 trillion stimulus package with significant implications across financial services, tax, health and all other aspects of the economy.

This legislation would provide cash-flow assistance through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency. The legislation proposes that any business employing fewer than 500 employees is eligible for a loan worth up to $10 million made under section 7(a) of the Small Business Act. That loan may be used for payroll support, employee salaries, mortgage payments, rent, utilities, and any other debt obligations incurred before the covered period. This proposal would be retroactive to March 1, 2020, to help bring workers who may have already been laid off back onto payrolls. The borrower must not already be receiving support under the Small Business Act, including the EIDL detailed above. There are generous provisions built into the legislation for existing loan forgiveness. Businesses will be able to achieve loan forgiveness to the value of their cost of payroll during the emergency, with loan forgiveness decreasing by the number of employees laid off. The administrator of this loan may collect no fees or as few as possible.

We’ll post updates to reflect the progress of this Act to ensure you stay up-to-date.